American consumers have long been able to pay for many goods and services with non-cash forms of payment such as checks, credit cards, and debit cards. In recent years, consumers have increasingly relied on these non-cash forms of payment to pay for their purchases. For example, American consumers used credit cards to spend in excess of $250 billion during 1991. During the same period, merchants accepted checks totaling many other billions.
In many cases, merchants prefer to be paid in cash since non-cash alternatives carry some risk of non-payment. This risk includes losses resulting from errors and from fraudulently tendered checks and credit cards. Non-cash forms of payment, particularly credit cards, also cause the merchant to incur additional expenses in the form of processing and/or handling fees.
Many merchants have found that the additional sales generated by their acceptance of checks and credit cards outweigh the associated risks and expenses. Consequently, the financial industry has concentrated on systems and methods for reducing the risk of loss in spite of the ever increasing volume of non-cash transactions. Generally, a merchant's risk of loss is reduced by automatically acquiring transaction data and by pre-authorizing or verifying each transaction prior to its completion. The automatic acquisition of transaction data also reduces the amount of time necessary to complete a transaction.
The automatic collection of transaction data reduces the risk of loss by reducing the likelihood of errors in the recording of the account number and in other transaction data. Checks and credit cards both include elements that facilitate the automatic collection of account data. Checks have account information printed along their bottom edge. This data is printed with magnetic ink that is read by magnetic ink character recognition ("MICR") machines operated by banks and other check transaction processors. Credit cards typically provide account data in two forms: characters embossed on the face of the card that indicate the name of the cardholder, the account number, and an expiration date; and a magnetic stripe on the back of the card that contains the account number, expiration date and other information.
Pre-authorization or verification of each transaction usually reduces a merchant's risk of loss by passing it to a third party or transaction guarantor. Third party transaction guarantors contract with the merchant to provide credit card or check authorization services. These transaction guarantors, sometimes associated with financial transaction processors, operate computer systems and communication networks for acquiring proposed transaction data from merchants, looking up credit card and checking account numbers in databases, and providing authorizations or warnings to the merchants.
In these transaction guarantor systems, a merchant provides proposed transaction data to the transaction guarantor prior to the completion of the transaction. The transaction guarantor then verifies the purchaser's availability of bank funds or credit. If the transaction guarantor is satisfied that the merchant's customer has sufficient funds or available credit, the transaction guarantor will authorize the transaction, and will absorb the loss in the event the payment is uncollectible. Systems used by transaction guarantors to gather and verify transaction data are sometimes called "chargeback protection" systems because they enable the transaction guarantor to prevent the transaction from being "charged back" to the merchant by a credit card issuer in the event that the transaction was not properly authorized by the card issuer. One example of such a chargeback protection system is described in copending U.S. patent application Ser. No. 07/819,327, filed Jan. 10, 1992, U.S. Pat. No. 5,334,823, entitled "Systems and Methods for Operating Data Card Terminals for Transaction Chargeback Protection", the disclosure of which is incorporated herein by reference and made a part hereof. (The foregoing application will hereinafter be referred to as the "Chargeback Protection Application".)
In cases where a transaction guarantor provides authorization services and absorbs the risk of loss, the transaction guarantor typically charges the merchant a fee for these services. This fee is sometimes reduced if the merchant utilizes special data collection terminals that automatically collect the account data from a credit card. One example of a data collection terminal used in such transaction authorization systems is described in copending U.S. patent application Ser. No. 07/820,401, filed Jan. 10, 1992, entitled "Data Card Terminal With Embossed Character Reader and Signature Capture", assigned to the same assignee as the present invention, the disclosure of which is incorporated herein by reference and made a part hereof. (The foregoing application will hereinafter be referred to as the "Data Card Terminal Application".)
As previously mentioned, check processors generally utilize magnetic ink character recognition ("MICR") readers to facilitate check transaction processing. Bank-operated MICR readers are often large and handle large volumes of checks at high speed. Smaller versions of MICR readers, useful in point of sale or "POS" terminals or cash registers, are also known in the art. An exemplary point of sale sized MICR reader is available from Mag-Tek, Inc. of Carson, Calif. MICR readers expedite check-based transactions by automatically reading the account number from the magnetic ink on the check. This allows information to be provided to a check verification service quicker and more accurately than when the account number is read manually by the merchant.
Merchants that accept credit cards on a regular basis often employ electronic terminals that are able to read the account data from the card's magnetic stripe. With these magnetic stripe or "card swipe" terminals, a merchant swipes the credit card through a slot, and the terminal automatically reads and decodes the account number and expiration date from the card's magnetic stripe. The terminal then prompts the merchant to enter the purchase amount. Once the data is acquired, the terminal automatically places a call to a host computer, transmits the transaction data to the host computer via modem, and displays the authorization code received from the host computer. Examples of such terminals are found in copending U.S. application Ser. No. 07/790,658, filed Nov. 8, 1991, entitled "Card Transaction Terminal", and in the referenced Data Card Terminal Application, both assigned to the same assignee of the present application. U.S. Pat. No. 4,788,420 to Chang et al. also describes a magnetic stripe card swipe terminal.
Industry data indicates that a credit card's magnetic stripe is unreadable in approximately eight (8%) percent of credit card transactions. This situation occurs when the magnetic stripe has been damaged or intentionally destroyed. In cases where the magnetic stripe is unreadable, the merchant must read the account number and expiration date from the embossed characters on the card and enter the account number via the terminal's keypad. As a result, the advantages of automated data entry are lost (e.g., the risk of error is increased). Moreover, some transaction guarantors will not provide chargeback protection for transactions where the account number cannot be read from the credit card, since an unreadable magnetic stripe can be an indication of fraud or tampering.
In cases where the magnetic stripe is damaged but the card is otherwise valid and unaltered, it would be desirable to automatically read and decode the account number from the credit card's embossed characters. If the embossed account number can be read automatically, the chances of error are reduced. One example of an embossed character reader suitable for use in credit card transaction terminals is disclosed in copending U.S. patent application Ser. No. 07/910,410, filed Oct. 30, 1992, abandoned, entitled "Embossed Card Reader", and assigned to the same assignee as the present application, the disclosure of which is incorporated herein by reference and made a part hereof. (The foregoing application will hereinafter be referred to as the "Embossed Character Reader Application".)
Many merchants have significant investments in POS terminals or electronic cash registers. Sometimes, these POS terminals are connected to a merchant's accounting computer system or "in-store processor" via a data communications network, to facilitate the merchant's business operations. In order to facilitate the automatic collection of transaction data, it would be desirable to provide a transaction data terminal that could be used in conjunction with existing electronic cash registers and POS terminals. Since mass merchandisers often have many point of sale terminals within one store, and only a limited amount of counter space is available for each terminal, it is desirable that any transaction data terminal be compact and inexpensive. In addition, it is necessary for these terminals to operate in an environment where the point of sale terminal is connected to the merchant's host computer.
Accordingly, there is a need for a compact and inexpensive combination check reader, a magnetic stripe reader, and an embossed character reader that can be connected to existing point of sale equipment and operated together with the merchant's existing in-store processor. Prior to the present invention, such terminals have not been known.
Therefore, there is a need for a multi-reader terminal that integrates a magnetic ink character recognition reader, an embossed character reader, and a magnetic stripe reader into a compact point-of-sale terminal. Furthermore, the multi-reader terminal should be able to be connected to existing point of sale terminals and provide the data in a format that is required by the terminal.